Question

Here are simplified financial statements for Watervan Corporation:

1.) Calculate Watervan’s economic value added (EVA).
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.

2.) What is the company’s return on capital? (Use start-of-year rather than average capital.)
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

3.) What is its return on equity? (Use start-of-year rather than average equity.)
Note: Enter your answer as a percent rounded to 2 decimal places.

Answer 1

Based on the financial statements given for Watervan Corporation, the Economic Value Added is $54.501 million.

What is the Economic Value Added?

This can be found by the formula:

= (EBIT x (1 - Tax rate)) - (Cost of capital x Capital)

Tax rate is:

= 20 / 97 x 100

= 20.6%

Capital invested:

= Equity + Long term debt

= 256 + 121

= $377 million

Economic value added is:

= (109 x (1 - 20.6%)) - (8.5% x 377)

= $54.501 million

Find out more on economic value added at https://brainly.com/question/15469792.

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